A federal bankruptcy judge has given the green light to Saks Global’s restructuring plan, paving the way for the high-end retailer to emerge from Chapter 11 proceedings with reduced debt and fewer store locations.
U.S. Bankruptcy Judge Alfredo Perez granted approval to the company’s reorganization plan during Friday’s court session in Houston, Texas, praising the retailer for doing an “extraordinary” job stabilizing operations following a difficult bankruptcy filing in January.
The approved restructuring will eliminate the company’s existing equity and transfer ownership to senior lenders who have backed the reorganization effort.
Through its bankruptcy proceedings, Saks Global will eliminate most of its previous debt obligations and continue operating as a downsized entity. The company used the Chapter 11 process to rebuild relationships with high-end brand suppliers, shutter discount retail outlets, and close more than half of its Saks Fifth Avenue locations.
The reorganized company will operate 49 upscale retail sites, consisting of 33 Neiman Marcus locations, 15 Saks Fifth Avenue stores, and Bergdorf Goodman. When the bankruptcy began, Saks Global operated 33 Saks Fifth Avenue stores.
The restructuring agreement gives senior lenders ownership of Saks Global following their provision of $1 billion in fresh financing during bankruptcy proceedings, plus a commitment of another $500 million once the company completes its Chapter 11 exit.
Saks Global secured backing from junior creditors by establishing a litigation trust funded with $20 million initially, designed to pursue legal actions that could generate additional creditor recoveries. These junior creditors, collectively owed approximately $1.5 billion, would receive nothing without the litigation trust arrangement, court documents indicate.
Saks Global initiated bankruptcy proceedings on January 13 carrying $3.4 billion in debt, following a problematic merger with Neiman Marcus that created cash flow problems, hindered store inventory restocking, and damaged relationships with key suppliers including Chanel, LVMH and Kering.
